Begoña Morenés:

Good afternoon, everybody and welcome to Ferrovial’s conference call to discuss the financial results for the first 9 months of 2020. Just as a reminder, both the results report and presentation are available to you on our website. A couple of highlights on today’s results. Today’s results are not a set of interim accounts as per IAS 34. 9 months financial information included in our report has been impacted by the COVID-19 outbreak, mainly since the second half of March. At this stage, given the uncertainty about this speed and extent of the resumption in activity, it is not possible to predict how the health crisis will affect Ferrovial Group’s 2020 financial statements, especially in relation to impairment test of assets, fair value of discontinued activities or provisions for onerous contract. Ferrovial will continue to monitor closely trading conditions and further evidence on wider economic impacts from the COVID-19 pandemic, and we’ll update the market on these impacts accordingly. I am joined here today by Ernesto López Mozo, our CFO as well as the CFOs of our business divisions. If you have any questions, you may ask them through the form included in the webcast. During the Q&A session, at the end of this call, we will be reading out your questions and who they are from. With this, I will hand over to Ernesto, who will be leading this conference call. Ernesto, the floor is yours. Ernesto López Mozo: Well, thanks, Begoña, and thank you, everybody, for attending our conference call. Starting with the highlights for the first 9 months, I would like to go directly to the strong financial position that we achieved at the end of the first 9 months. This net cash ex infrastructure of €1.7 billion is higher than the closing figure of 2019. And we have record high liquidity at €7.5 billion. This has been helped by a very good activity cash flow from Construction & Services we’ll get into that later in the presentation. It’s also worth mentioning regarding financial position, the financing of the private activity bonds of LBJ, a substantial reduction in interest cuts going forward and also on the back of patterns of recovery in the asset that helped to achieve a good rating and a good issue in the market. Of course, COVID-19 has been impacting and we will review the main impacts in our accounts and operations. In Toll Roads, clearly, traffic has been impacted, but the third quarter has been much better than the second. And as restriction ceased, the traffic was coming back to the network and also to our roads. We will see more of that later on. In airports, there is a strong impact on traffic. And this is affected, of course, by the travel bans and quarantines we’ll get into that later on. What our airports operations have been doing is streamlining operations and getting liquidity ahead of a potential extended contraction. In terms of construction, we have remained with high production levels, mainly in Poland and the U.S. and EBIT margins have improved. The accumulated for the first 9 months of the year is 1%. We also see that services that is held for sale has performed well in many activities that are essential. Another topic that has been one of the priorities of management has been achieving operational efficiencies. Many of those will remain for the future and make the company leaner and more efficient, bring more value to the different stakeholders. The initiatives more remarkable for the size are probably the ones taken out by Heathrow and Aberdeen, Glasgow and Southampton. Also, the corporation and the rest of the businesses have been restructuring according to the plan that was announced. And one of the main initiatives, of course, is the digitization of the support function, something that will come along in the future. All these initiatives that have been launched, as I mentioned, should remain and bring value in the future. Then, of course, even in this environment that is quite tough for any M&A transaction, we go on with our rotation of assets. I mean, it’s part of our strategy. And we reached an agreement to sell the Portuguese Toll Road for €171 million. Of course, there’s no cash yet from that transaction, is pending authorizations that should come in due course. Also, we materialized the sale of a 5% stake in Budimex for €57 million. And also, we got the closing of the broader spectrum transaction that was agreed with the buyer at the end of 2019. Okay. So we move on to the following slide. We start directly with the impacts of COVID-19. In the P&L, starting with airports, as I mentioned before, traffic has been affected. Cumulative in Heathrow for the first 9 months is nearly 69% drop in traffic. But there has been also impact from provisions, £103 million for restructuring and streamlining and also £85 million of fixed assets impairment. Aberdeen, Glasgow and Southampton also had a drop in traffic north of 70%. In Toll Roads, as I mentioned before, we have to look at the different quarter-by-quarter or even month-by-month evolution, we’ll get into that. But the cumulative for the first 9 months was 44.5% drop in 407 ETR, 28% in NTE, 36% LBJ and 16% in the NTE35 West. Construction, the impact we estimate from COVID-19 in the first 9 months is €44 million, a negative effect in EBIT and this is pretty similar to what we had in the first 6 months of the year and has been done with a bottom-up analysis. Here, we are taking into account costs from stoppages, loss of productivity, increased labor costs and so on. What we are not taking into our accounts is any, let’s say, revenue from claims that we are processing for compensation, okay? This is something that we’ll look at into the mitigating measures just on the right top corner of the slide. And then in services, we had a €99 million impact, and this has to do more with some reduced activity in some areas and some additional costs. Of course, if we move into mediating measures and start with services, I mean there has been cost reductions and also the benefit of some temporary flexibility measures provided by the UK and Spanish government. But clearly, Services is looking to do also more streamlining, as we mentioned, with other business divisions. And Construction, as I said, in terms of compensation, there’s some claims being processed, launched or log and this will take some time, but there should be some success on recovering this part of the effect that we incurred of the €44 million I mentioned. Then in Airports, as I said, the size of the airport is quite important with Heathrow OpEx reductions maybe in north of €300 million and CapEx reduced by €650 million. Also, AGS, even with a smaller size, is reducing OpEx by 34 and CapEx by 23, okay. And well, Toll Roads as well. You can see their effort there even though it has a low-cost base and even some additional initiatives. And then in – at the corporate level, we have the initiatives. As I mentioned before, part of that has to be with digitizing support functions. And of course, we took a provision of €39 million for this streamlining that has been recorded in the in the accounts. So some of – I mean, many of these mitigating measures should add value for the ongoing future. In terms of cash flow, the main effect probably has been the dividends from the – our infrastructure assets, and you have the main numbers there on the slide. The 407 €159 million is our share compared to €222 million last year, and then you have, of course, Heathrow and other projects. Well, nevertheless, there’s €207 million that have come from our assets so far. We don’t expect dividends in Heathrow, in the coming months until the situation of the waiver expires or we have a regulatory asset ratio that is the net debt to regulated asset base below 87.5%. Of course, as I mentioned before, we carry on with the strategy. I mean, priority, of course, is safety, and liquidity, strength of balance sheet for the opportunities that could come around. And of course, also support for the community has played a role and plays a role while the pandemic is ongoing. But our focus remains on creating value for stakeholders developing and operating innovative, efficient, sustainable infrastructure with high concessional value. So the company is working on that. And hopefully, we’ll be able to reap the fruits of that effort in the near and medium term. Okay. So if we move from that COVID-19 slide into the Toll Road section, we can see the patterns of traffic that I mentioned before. We can see how the tough in all the North American assets was seen in April. And then as the economies reopened, restrictions were lifted, we saw traffic coming back. But I mean, we have to be realistic. There’s a lot of restriction to mobility still, I mean, office occupancy is still low. We’ll get into that later on. And also schools really, the students don’t have to attend in person, right? So even though they are open, it’s pretty much online, so, all that affects overall traffic. And now it’s also true that, as you know, there is more cases coming up. There is like a second wave in the – I mean, in North America and Europe taking place. Still, you can see that the latest data that we have from October up to the 19th, it still shows in many of the roads our better performance. One of the accounting impacts that we have in the operating results of Toll Roads is the impact of Autema. Autema, we have been – I mean, our appeal to the Supreme Court has been rejected. You know that the grant or change the terms of the concession from financial asset into an intangible asset with traffic risk. So we appealed to the Supreme Court in Spain, but they have rejected that. That means that in the numbers you see, you have the full 9 months of 2020 with Autema accounted for some intangible assets. And also in the comparison like-for-like, we’ve taken the impact in 2019 as if 2019 had been also an intangible asset. So – I mean, there is no change, of course, in cash or net cash position coming from this asset. But you see that – I mean, the impact is relevant in terms of numbers. I mean, in revenues, the intangible asset first 9 months just gives €42 million in revenues, whereas as a financial asset, it would have been €85 million. And in terms of EBITDA, as an intangible asset is €36 million, as a financial asset, it was – it would have been €79 million, okay? So as I said, we don’t have a net cash effect out of that, but of course, the accounting impact in the operating results. There’s also impact into the – an impairment into our holding value of this participation that I will get into later on when I review the results below the operating section. Okay, so if we move on to get into the detail, we’ll see that the impact from traffic has been, let’s say, dampened by the good mix of traffic. Okay. So if we move into the specific section on the 407ETR before getting into the managed lanes, we see that traffic in the third quarter, even though, I mean, fell vis-à-vis last year, was clearly much better than the second quarter. The performance in terms of revenues is also helped by traffic mix, even not to the same degree as it is in managed lanes in Texas. And also, it has been helped by Toll rates being higher than last year. Okay. So – I mean, we have to be aware that restrictions to mobility in Toronto have been probably higher than or bigger than in the Dallas-Fort Worth area. And now with a second wave coming in, we have what is called a modified stage 2 that, I mean, reduces the limits for social gatherings and public events and and so on since October 10. That’s also one of the reasons why we provided the number for October – up to October 19 in the previous slides. Schools, universities, colleges, places of worship will remain open, in-person attendance is voluntary. In terms of dividends, I would like to highlight that in this quarter, there was $250 million distribution that adds on to the $312.5 million of the first quarter. Okay. So I mean, the Board will keep an eye on the evolution of the asset for a potential dividend in the fourth quarter of 2020. Okay. So if we move into the managed lane performance in the next slide. Here, we can see a clear help from commercial and heavy traffic. And we see in terms of transactions, the drop vis-à-vis last year is much smaller than we were looking at; the 407 NTE was at 28% drop, LBJ 36%, and NTE35 West 16.2%. But look at these assets, I mean, it’s even growing in revenues at the EBITDA compared to last year, right? So still, I mean, there’s restrictions, social distancing, but heavy vehicles are showing more resilience and we’ll look in the following slides into the different patterns. And remember that heavies have higher toll. There’s a multiplier that is between 2x to 5x the light vehicles Tolls. Okay. So in terms of restrictions to mobility, as we said, there was a quick reopening in May the 15th, but then with the surge in cases in June, I mean, there were more restrictions, even in the third quarter, there were up to 50% occupancy that has moved on since September 21 to 75% maximum capacity, but we’ll see in coming slides that occupation in any case has been below 50%. And schools still are not opening in person, right? I mean, they’ve opened in October, now in any of the numbers we’ve seen for the first 9 months for the third quarter. Okay. Financing, I already mentioned of LPJs, private activity bonds. Just look at the yield below 3%, and I mean, these ones had coupons north of 7%. So interest payments will be substantially reduced going forward. And, well, all the managed lanes are operating above lockup levels. Let’s see how thy performance evolves through year-end. Okay, if we move to the next slide. One, I also like to see the actual data, how it’s shaping, we have all the 4 main Toll Roads in North America. And you can say, I don’t know if the colors you can see them correctly. You have in grey or light grey, kind of dark grey or black and yellow one. I mean, the yellow one that is the lowest in all graphs is what we could see as a trough this year that was the last week of March. And then you have the gray line, light gray is March first week where everything was, let’s say, at full cylinders. And then we have the black or dark one that is the third week of October. So starting with the 407, I mean, you see that on the way back, I mean, you to get again the kind of shape where morning and evening you have more lights. And this is important to bear in mind even when you look into different ways of work that we have now. I mean, flexibility probably calls for still maybe an extension of the peak time since people if they go to work, they go for several hours, not just for an hour or a couple, and that calls for, let’s say, some sort of usage of those peaks or higher usage slots in the day. If you look into heavies, and you can see that a pattern that is very similar in all the roads, I mean, it’s a very good level compared to last year’s, even in some cases, look at NTE35 West is above last year. If you look into NTE, pretty much the same thing, you have a very high and stable usage of the road, maybe a minimum drop or trough around lunchtime. But you can see that clearly, there’s a high activity all day and very similar to last year or even higher, right? So even with this kind of traffic drop, you see that patterns tend to come back to what we’ve seen in the past. Okay, so probably that’s enough for that. I mean, we are at a time of a lot of uncertainty. We move to the next topic that is one of your favorites, the work from home topic. Really, it’s all about gathering more data, and we’ll see when really the economy reopens and it’s not a health issue how the different patterns pan out. But we have some data here that is current data or just some tolls or studies by different universities trying to put a framework for you guys to make a decision on this uncertain environment, right? So we have different studies. If we start with the top left corner when we talk about observed behavior or pulse or studies, all those paragraphs are related to U.S. information right? Either from polls or actual or from universities, you have bought on the different sources. So – I mean, this statement now is 60% of the workforce including theory, work from home, right? Of course, you will need to see how that translates into what part of the time is actually carried out from home, if they go to the office or not, but employers are required, right? The level that was done from home pre-COVID-19 was between 5% to 10%. And during this COVID-19, we reached kind of the top or just over 60% in April. And now the estimate is that it’s at 40% in September with restrictions still in place. Okay, so post COVID-19, there is a lot of studies that we said we’d like to tread on actual data before making models. And there is different degrees of work from home that could happen. There is a lot of emerging thinking about flexibility, and employees wanting to have – I mean, their presence at the office, but flexibility to come and go and may be some remote work. But of course, there is as variety depending on the different businesses. But clearly, there is a mixed additional work we are seeing now. We are seeing now we have the data on the right for Ontario. This is based on the Leger survey. And here, you can see that work from home is pretty much at 40% now. And you have, let’s say, the average strips falling around 40% vis-à-vis last year. Of course, as I mentioned, this is work from home and a situation where from a health point of view you have to use it not to a degree of flexibility, but probably more preemptively. Okay. So – and other information that is good to look at to see that not all the cities are the same and here, we have information from Castle Systems back to work parameter. And here, you can see that Dallas-Fort Worth is higher in the back to work or to the office with 40% occupancy, and this is a data from the 30th of September, right. So it’s good to see the difference between cities like Dallas metropolitan area or New York or San Francisco or even London, if I may, I mean, do have different patterns and also probably different share of public transportation, for sure. Okay, so still there is limits. This is kind of data that we will keep looking at and of course, there is other very important levers that we need to pay attention to. And the next one is e-commerce. And here, we have different numbers gathered from the U.S. and you can see that e-commerce as a percentage of retail sales has been steadily pre-COVID. I mean, in 2010, it was less than 7%. And now in 2019, it was 16%. But in the pandemic, I mean, the percentage has gone higher. And in the second quarter, it reached almost 21% of retail sales and is expected to continue to rise, I mean, to 25%, 30% easily. I mean, all these are projections from different studies or sources, right? So it’s not only that this is growing, but the dynamics are interesting to watch. And as I said, all this kind of data will be going into our modeling going forward, right. So there is some pattern changes, right? Some shopping that was done personally tended to be off peak during weekends, and this now moves to peak periods or in the middle of the day, right? And you can see that relates to the kind of graphs that we are showing in terms of heavy traffic daily patterns. Also, I mean, the items purchase are transported by larger vehicle. We mentioned about that in terms of Tolls, and intend to do with stops that could bring more congestion to our growth outside the Toll Roads. But in any case, the overall system gets congestions from this stop and go. And then there is additional trips that are difficult to model, but are happening, right? And you have deliveries to households that have no car or mobility impaired you have additional trips due to failed deliveries or items being returned. And these are not minor, right? So these are things that we’ll have to check out, right? And then, of course, there is even more segmentation of the offer online, and you go to, let’s say, urgent deliveries, that could mean even more pressure on mobility, right? So as I said, all these are emerging data that we need to keep an eye on and probably are being seen more in the Dallas-Fort Worth area since it was reopening in a more mood than others that you can check. Okay. So let’s move on. We keep on with different levers or impacts that could affect the models going forward. We need into population – we look into population, of course, the data I’m showing you on the different projections are pretty pandemic, right? So – of course, there’s the question mark if these areas that have been vibrant will remain so. And in favor of that would be to try and diversify even more rather than importing things that were not done in the area or in the country or even, let’s say, having some sort of more synergies, right? So these are areas that are diversified from an economic point of view but also are attracting population growth. And you can see in these surveys and well in actual data that Toronto and Dallas were in the U.S. and Canada, the top two in terms of growth up to July 2019, they remain in a very high area. Also, Charlotte is not doing bad in terms of ranking. And then you have projections that – again, they are pre-pandemic, but they have different scenarios by the Canadian Ministry of Finance regarding Toronto, and all of them showed very interesting growth. Okay. So that’s another point that should go into the models. Of course, with the current uncertainty, it’s very difficult. You have to try and gather data, but it’s good for sensitivities to try and work on this. Next slide, I would like to move on, again, as I mentioned before, is the economic diversification. And that’s key to a strong economy and more interaction and also to see that the kind of customers that we have is quite diversified. I mean, the Dallas-Fort Worth managed lanes, you have here the segmentation, of course, the blue ones that are pre-COVID in total numbers is a different base. Probably if – I mean, I have to check this, but it’s probably like third lower, the base of clients that we are considering in terms of users for the, let’s say, red one or burgundy, if I may. This kind of graph, in any case, shows that there is a very good diversification of customers. And it’s important for the different sections and the kind of patterns that they could have that you do get a look. And of course, as I said before, in terms of sectors in the economy, we have presented this in the past, but it’s a good reminder of how diversified these areas are. Okay. So that would be for Toll Roads. Let me move into airports, Heathrow. And well, Heathrow probably these results sent yesterday. I don’t know if you were on the call, but definitely very good information provided there. Operational performance, as I mentioned, shows quite a reduction in passengers affected by, let’s say, quarantines and trouble bands. But – I mean, you can see that – I mean, Heathrow is coveted by the different players, right? You have 80% of the airlines are flying. In terms of how this – we are only operating from terminal 2 and terminal 5, but 77% of the outlets are open. You have new airlines coming in, that’s important. They are already operating. And we are just looking forward to see if there’s a couple of tax force that looks into testing. And the projections from Heathrow that will touch on this soon are based on testing taking place next year and also vaccines being available, okay? So I mean, the global travel task force is working towards this target. In terms of financing, I guess this is key, given there was some confusion with the Heathrow note. Heathrow has a very good liquidity position. I mean, at the end of the first 9 months, it had €2.4 billion in cash. But after that, it has raised additional €1.4 billion of bonds in the capital markets. And it has also raised subordinated debt in ADI finance too, €750 million that is available, right? So you have more than £4.5 billion – sorry, I said €750 million, it was £750 million, the ADI Finance 2 facility. Okay. So all this additional liquidity should provide the comfort in the sense that even with no revenues at all, something that is very harsh and it’s not happening, it could go for another 12 months. And with the projections that Heathrow mentioned yesterday, it could go even into 2023, right? So there’s a lot of liquidity, but some confusion regarding the dimension of capital injection. Well, this subordinated layer, the money comes in, let’s say, more senior part of the financing structure as equity, right? It’s equity line. So that was the mentioning and clearly, there is appetite in Heathrow for this kind of facility. Okay. So looking into the first 9 months results, I mean, you can see that there was impact of extraordinary items like the £103 million provision and the capitalized cost write-off of £85 million. So all these, as I said, and the provision should mean a leaner and more efficient Heathrow for the benefit of really all the stakeholders, right? In terms of the management therefore that I think is huge, I mean, this sale to go for more than £300 million of cost savings. And right now, they have achieved more than £200 million, right? So it’s a good effort, and they remain on track for the remainder of the target. And the different initiatives have taken place here like pay reductions using furlough schemes and the organization has been restructured. Supplier contracts have been renegotiated and nonessential costs have been stopped right. So Heathrow really is on top of all these things, and CapEx has been reduced by more than £650 million. So probably for you, it’s more interesting the – looking ahead based on what Heathrow mentioned yesterday. I mean, they are looking to 2021 with 37 million passengers of course, with all these outlooks, I mean, it’s high uncertainty surrounding them. And also, that’s the reason why you get additional liquidity, right, as Heathrow did in October after all what had been done in the first 9 months, right? So there will be more details in December with the investor report. So this kind of projection doesn’t bring any sort of covenant bridge or ratio bridge and that’s important. Of course, we always have to be paying attention and preparing just in case there’s more delay in traffic coming back, right? So the – another point that got a lot of talks and coverage in the press was the Heathrow re-opener. And well, we should bear in mind that all the investors are investing in regulated assets in the UK and in particular, in the – in Heathrow. Look at the regulation that basically acknowledges in the regulated asset base efficiently incurred CapEx. It means CapEx that has been done in consultation with all the stakeholders, mainly the airlines and it’s good for consumers. And that is recognized and has to get a fair return, right? And here with the fair return, the regulation for the current settlement really provided a low return with a low perceived risk. But even made the specific comment regulation that in extraordinary circumstances, that could be reopened, right? So I mean, the CAA recognizes these are extraordinary circumstances. And then there will have to be a discussion on any, let’s say, compensation, if it has to be done now or later and the size of it, right? So Heathrow is going to be submitting, I mean, the strong arguments and evidence for taking action now. And then the way it has proposed to do it, that is to get regulated asset base back, is a very good way to reconcile all the stakeholders’ interest and then imply a cash outflow for them now. Okay. So as I said, this is based on the regulation that has a risk-return framework, that is the framework that investors trust when investing in the business, okay? So while there is stuff that will be going on the coming months or very active in this regard would be the consultation, not only for the reopener, but for the next regulatory period, the H7 framework. Okay. So, a lot of this to come, a lot of work for Heathrow and regulation, okay. So if we move on to AGS, Aberdeen, Glasgow and Southampton, here the management has also done a very important effort of restructuring and getting savings, and also drawing down on liquidity, the drawdown of £38 million in the first quarter means that now the asset has £35 million in cash and equivalents and net external debt of £726 million. And then that was a waiver agreed that’s subject to compliance with some liquidity conditions, sorry, for 2020, but there’s ongoing dialogue now between AGS, the shareholders and the lenders to see how they can take the company going forward if – of course, this would be a kind of profiling of the financing for the coming, let’s say, years for the short-term until we get the traffic back, okay? So here we should expect that it could be quite likely to do some capital injection, but limited and not really material in the whole balance sheet of Ferrovial. But this is something that, for commercial reasons, we are not discussing now. But yes, it could be expected that there could be some need in the coming months, more in 2021, that is this year, of course. Okay. So let’s move on to the next a slide to the Construction division, where I think it’s very good news what we have. I mean, production levels have been very high margins. We are now at 1% cumulative for the first 9 months. Of course, this is a lot based on the excellent performance of Budimex, that is way above what we and management in Budimex has expected, performing much better in terms of execution, winning contracts, generating cash. And it’s not only construction the real estate division is performing great, right? So this has been the main game changer in terms of our cash flow projections. Also, the U.S. keeps executing well. And we can say that in general, the division has kind of turned the corner and doing better, right? So we think that the EBIT margin above 1% should be achievable. Of course, always – at these uncertain times, we have to be careful, but I think that we expect that. And also in terms of net cash, we shouldn’t be getting cash consumption from construction. Remember that we were expecting to consume €300 million or more than that this year. It’s not the execution in the U.S. that keeps at good pace. Probably slightly better than what we thought and also the performance at Budimex has been much better. So I think this is very good news from Construction and we can move on to Services is the next slide we’ve got here, okay. So we – in Services, we mentioned before the impact of some reduced activity and additional costs. But clearly, some activities are essential. And going forward, probably even more so since some of them reduced environmental impact of human activities, right? And here, probably it’s worth noting that waste treatment in Spain has performed well and also in the UK facility, management of solid maintenance. If we look into the level of activity, we have a graph on the top right corner, where we can see that in Spain, revenues are now, at the end of September, at the same level as last year, right? So, let’s see. I mean, there’s – a second wave is different from the first one. I mean, the company is prepared, but the level of activity is always uncertain. Of course, the cash generation has been very good. It’s true it’s on the back of a very good working capital management. And I think that the Services management has done a very good job here. The sale of Broadspectrum was closed. I won’t dwell into that, but also other processes are advancing. There are subsets of the transactions that we mentioned before. They are advancing. Of course, in this environment, pace is not as fast as it would be in a normal situation, but they keep advancing. Okay. So now if I may, I will move into the consolidated P&L below the operating level, even though there’s some comments on EBITDA that I mentioned before. They are there in the slide in terms of EBITDA. And then we have the line of disposals and impairments. We have the additional impairment in terms of equity participation of €43 million that I mentioned for Autema. This is not a cash out. I have to remind you of that. And also, there is no sort of commitment or guarantee regarding this asset, right? So take this as an accounting effect, not that there’s any cash outflow expected at all. Okay. So if we move into financial results, just below that line. Really, the main impact in the overall financial results comes from the fact that last year, the equity swaps to hedge the performance share plans were – I mean, with the share going up, showed up positive performance. Now this reflects the, let’s say, drop in the share price. It’s not something that – as I said, it’s a hedge for an economic performance for managers and employees. Okay. So, in terms of equity-accounted affiliates here, I would like to comment on Heathrow. The same as it happened in the past results in the first 6 months of the year. You have many impacts that are not cash outflow, but I mean, they are significant in terms of P&L but probably are a little bit misleading, right? For instance, we have an impact of €61 million for the fair value of derivatives. And as I said, this is mainly related to the inflation-linked swaps. I mean, this swap was very important to hedge the regulated asset base and the gearing ratios, and actually, breakeven inflation has been locked in, like, a 3.5%, let’s say, on average. This is a variety, but that could be a very good, let’s say, benchmark for what’s going on. But the inflation realized is much lower. It’s 1%, right. So, I mean, they are clearly bringing a benefit in terms of cash to Heathrow and protecting also the – on the net debt to RAB ratio. But they have the mark-to-market based on lower real rates. And of course, this is a very important topic that we have to discuss. It’s an agenda for the next meeting. Let’s hope it can get addressed at that meeting. Then in terms of other stuff that goes in there. You have restructuring provision that will bring benefits, and you have the impact from Autema that I mentioned. Then you have an effect of discontinued activities. That is a mixture of – a, mixture value adjustment, b, final impact of exchange rate differences in Broadspectrum and the impact of Spain that is positive because it’s adding results and it’s not depreciating the assets. Okay, so a lot of noise surrounding the numbers. As I said, many of them are not cash, and others will be bringing benefits in the future. Okay. So now we should move into the net debt evolution that, as I said, is better than what we expected. And here, we have the dividends from projects, a much better working capital evolution than in the past. And of course, we have a shareholder remuneration that is taking place. And in other financing flows, you have the deconsolidation of the net cash position of Broadspectrum. You also have the FX effect of advanced payments in construction in dollars that are to pay for expenses going forward. So this is a normal effect that has the counterpart of the lower expense. And then, of course, you have also a small part in the tune of €20 million from minority shareholders’ dividends relating to Budimex. Okay, so very good evolution, better than what we expected, higher than last year December ‘19. Okay. So let’s start to wrap up before your questions. And if we move to the summary that I would like to highlight, is, well, traffic is impacted by COVID-19. But I mean, the patterns that we see when it reopens are for you to assess. But clearly, when there were less restrictions patterns, we’re coming back in a similar shape as in the past. We’ll have to see going forward. In UK airports, quarantines are really affecting, like in other airports. Testing is ready to improve flow, and we have the consultation ongoing, so a lot of things on the plate, very important with a lot of liquidity and Heathrow that is key. Construction is clearly performing with – really happy with how it’s evolving. And of course, this is let’s say short-term. Looking long-term, we need to keep the eye, let’s say, in the forest, not the trees. And our assets are in very good locations with diversified economies. Population is growing, and e-commerce, mobility trends are interesting to watch right now. The long duration is key and the pricing flexibility to adapt to the different patterns, we think is important. So we’ll see how this evolves. And then, of course, it’s about focus. I mean, we keep looking for opportunities to grow, of course, taking all the different factors into account. For that, we have very strong liquidity, and we are looking for operating efficiencies. Before the pandemic that have been accelerated and some things can be done now that maybe are more complicated to do on a cruising speed, right. So – for example, at Heathrow, so all this should bring value in the future. And also last but not least, very important, I mean, the company has decided to pay €0.20 per share. Of course, that compares to last year €0.40 plus, and we keep doing the buyback program, the share buyback program that’s ongoing. I mean, the main reason for this, as I mentioned, you have to be strong, looking for opportunities to grow, and we think this is a good balance, okay. So thanks a lot for being with us. And of course, now we open the Q&A session. Thanks. A - Begoña Morenés: Thank you, Ernesto. The first set of questions comes from Jenny Ping from Citi. LBJ refinancing has been done. Should we expect a dividend to be paid later this year? And when will you make this decision? Pedro Agustín Losada Hernández: Thanks, Begoña. This is Pedro Losada from Cintra. Thank you, Jenny, for the question. It’s true that part of the LBJ refinancing has been done last September, refinancing the private activity bonds but still remain the TIFIA loan as part of the current financing structure. So we – our aim is to end up this year distributing the trapped cash that we have been accumulating over the last 5 years per financing contract, but we are still considering different options. First is to see how the traffic performance evolves by the year-end. And the second option is we are analyzing different financing structures that could lead to refinancing of the TIFIA loan. Those are good options to end up with dividend distributions without any type of restrictions, but we need to find out whether we can extract equity value from these refinances before we take the decision. So the answer is, the goal remains the same, but we need to wait till any of these two facts happens. Thank you. Begoña Morenés: Thank you, Pedro. The second question also from Jenny, can you give us a sense of the strategy behind the Services sale? Will all assets be sold as one package or will it be broken up in pieces? Ernesto López Mozo: Okay. I’ll take that one. This is Ernesto speaking. One of the things that we are seeing in Services is that there’s a touch of industrial buyer that really looks for things that are more specific, where synergies can be, let us say, extracted. So there’s some players that they could be financial, but have some sort of industrial expertise that could be looking to certain businesses, like, for instance, waste treatment, others would be looking for facility management. And it depends on the country, and I mean what – we can see is, for instance, in the UK, there have been transactions that were complementary. People were looking to, let us say, complement their portfolio somehow. And I guess that in sectors that are coming back for a situation that was with tighter margins now we have all these players, that could be interest there, right? So the strategy is more, let’s say, dismal, but makes sense because it could match more the interest of buyers, right? I mean, right now, what is going on is just some smaller pieces, some international stuff, all the smaller parts of Amey that help to that goal, right? I mean, to get, let’s say, out of the question, some parts that are maybe not suitable for the buyers that are looking for the more weight or important parts of the businesses, right? So clearly, it has to be tailored in that regard. And when you see most of the transactions going on in the Services sector, they are kind of that, more specific rather than broader. Begoña Morenés: Thank you, Ernesto. The last question from Jenny refers to Heathrow and the ADI finance to £750 million loan. It’s says another layer of loan, £750 million, can you confirm if this loan needs to be paid down before dividend to shareholders can resume? Thank you. Ignacio Gastón: Hi, Jenny, nice to talk to you. Thank you, Begoña, for it. This is Ignacio Gastón from Ferrovial Airports. Jenny, with respect to your question, the terms and conditions of this subordinated facility are confidential. Therefore, we cannot disclose to you the whole detail of that debt – that piece of debt. What I would like to remind you that according to the waiver that was approved with the Heathrow finance creators back in June of this year, no dividends can be paid by Heathrow to the latest shareholders during the waiver period or if later, the date on which the RAR is not greater than 87.5%. Thank you, Jenny. Begoña Morenés: Thank you, Ignacio. The next question comes from Stephanie D’Ath from RBC. What are your expectations for the fourth quarter and for 2021 in terms of ETR407’s traffic? Do you expect a steady movement from here or a potential deterioration like the one seen in Europe? Pedro Agustín Losada Hernández: Thanks, Begoña. This is Pedro speaking. Thanks, Stephanie, for the question. Well, if – when it comes to traffic on the 407 for the next quarter and next year, we typically don’t give any type of guideline and more when we are in the starting point of the second wave of COVID in the area. Presumably, that could stop the improving somehow from now to the year-end, but we don’t know yet which are going to be the implications. But taking your second part of the question, we do see steady improvements for next year, but that will be pretty much dependent on several things. And that includes, obviously, the restrictions from the administrations that could impose and definitely can restrict the traffic. But if you take into account GDP consensus and the vaccine coming sometime in the near future, hopefully, that is some of the things that allow us to be more positive, looking at the – as well as the differences between the severe restrictions that we are suffering in Europe with respect to the ones in the Toronto area or the Dallas area. So just summarizing, we believe that without taking into consideration that these restrictions could take longer than expected, we see improvements for the coming future. Thank you. Begoña Morenés: Thank you, Pedro. The next question from Stephanie, what should we expect in terms of tariffs for the 407? Pedro Agustín Losada Hernández: Thanks, Begoña. Well, as I mentioned, we are starting the second wave in the area and the surrounding area of Toronto and the 407. Perhaps it’s too premature to understand how will this affect the tariffs, but probably it’s fair to say that we don’t see any changes during 2020. As you recall, we do stop our tariff strategy, our seasonal tariff strategy that we laid out early this year. So we pretty much believe that we are going to remain the same for the remaining part of the year. Thank you. Begoña Morenés: Thank you, Pedro. Last question from Stephanie, how has the pandemic impacted the U.S. Managed Lanes ability to pay dividends? Pedro Agustín Losada Hernández: Thanks, Begoña. Well, Managed Lanes. When you talk about Managed Lanes, the ones that are able to pay dividends during 2020, it is LBJ and NTE. On LBJ, as I mentioned in the first answer, we are considering several options to extract as we did on NTE. All the cash trap that we have been accumulating over the last 5 years that has been the first 5 years of operations. And on NTE, we are expecting to receive a dividend by year-end. Of course, this dividend has been – I mean, this dividend flow that we are going to receive from NTE is lower than expected due to the traffic impact that we have had during the year. Thank you. Begoña Morenés: Thank you, Pedro. I did miss Jenny’s last question, which I will go back to now. Can you elaborate on the mitigating measures of Construction and Services and quantify the potential of recovery? Ernesto López Mozo: Thanks, Begoña, for sending me the easy ones. Well, we would not provide an estimate. We’ve talked about the impact. For commercial reasons, we don’t provide estimates here, and we prefer to be conservative, right? So we are not recording anything. You have the impact? Well, take a guess. Something will be recovered. I am afraid I cannot be more specific, sorry. Begoña Morenés: Thank you, Ernesto. The next question comes from Bosco Ojeda from UBS. Can you give some color on the percentage of heavy traffic or the percentage of heavy traffic revenues in the 407ETR and Managed Lanes? Pedro Agustín Losada Hernández: Thanks, Begoña. Hi, Bosco, sorry, but unfortunately, we do not provide this breakdown. Thank you very much. Begoña Morenés: Thank you, Pedro. The next question or set of questions come from Fernando Lafuente from Alantra. What explains the strong shift in cash consumption expectations for Construction? Do you expect the business to be free cash flow breakeven? Iñaki García Bilbao: Thank you, Begoña. And thank you, Fernando, for the question. Well, this extraordinary, I mean, shift is basically based on Budimex, and not only in the Construction business that I will give you more detail, but also on the real estate business. I mean, the real estate business has generated €75 million and – due to more natural sales and less investment in your plots. In terms of Construction, two things I will mention. I mean, first, better underlying profitability. I mean, we are seeing new contracts with better margin and also the units that we are executing in this moment are also having very good margins in the early stages of the projects. But also the working capital, I mean, also incentivized by the government and the administration, we see better collections. Of course, I mean, efficient invoicing, because we are reducing the time for these invoices, but also a very quick settlement of the receivables. On the other hand, and as Ignacio mentioned, the gas consumption in the U.S. is better than our initial expectations in some contracts – with all those contracts. I mean, with losses due to the delay on the projects, particularly in the I-285, I mean, because of the weather conditions, which delays part of this consumption, but also, I mean, very good working capital management. Thank you. Begoña Morenés: Thank you, Iñaki. Second question from Fernando, is there any positive one-off in Q3 for Construction? If not, what explains the jump in performance versus Q2 in terms of EBITDA and margin? Iñaki García Bilbao: Thank you, Begoña, and Fernando, again. Well, two things I will mention. I mean, first is that you are not seeing in the Q3 the same impact of the COVID-19. I mean, that you saw in the Q2. I mean, Q1, no impact, Q2, I mean, we saw €44 million. And in Q3, we have not seen any movement on that. I mean, slight differences between geographies. The second is, again, I mean, Budimex. Consolidation of the better performance that we saw in the second quarter, including, again, I mean, the real estate business and in the U.S. contracts, only the losses coming from the internal fees. I mean, so in general, I mean, very good performance in all the divisions of the Construction, but not to mention, I mean, Budimex performance. Begoña Morenés: Thank you, Iñaki. And the last question from Fernando. What are your views on the full year dividend for 2020? Is it still to be decided? Can we assume that €0.20 per share announced corresponds to 50% of the total for the year? Ernesto López Mozo: Okay, thanks. This is Ernesto. Well, the decision has been through the second dividend that is like the last part of the dividend for the year for it to be €0.20 per share. And as I said, we keep on with the buyback program. So again, we get questions and probably later on about what’s the rationale. The rationale is what I mentioned really. I mean, this is the time to be with a strong balance sheet and liquidity. We think that there could be opportunities on the way out of this situation. That is uncertain in terms of the length and the size of the impacts in the different economies. And we prefer to trade cautiously. I mean, there’s a lot of uncertainty, but we think there could be good opportunities because countries will need to look for productive investments. And there’s a lot of infrastructure needed and infrastructure has a very good multiplier. So that’s the reason behind it. There’s nothing additional. Begoña Morenés: Thank you, Ernesto. The next question comes from Filipe Leite from BPI, and it refers to Budimex. Can you explain the reason for the 10% EBITDA margin in the third quarter of 2020 versus the 5% in the same quarter of last year? Is this related with provision reversals? Iñaki García Bilbao: Thank you, Begoña and Filipe. Iñaki García from Construction. Again, I think I have already mentioned, I mean, the performance of Budimex and it’s just the quality of the backlog that we have in the Construction. I mean, as I mentioned, I mean, better margins and particularly having better margins in the units that we are executing in, in this moment. But also in the real estate business, I mean, just to give you some detail on the EBIT margins. Last year, it was around 17%, and now it’s 21%. I mean, so you have another 4% difference in terms of EBIT and EBITDA in the real estate business and particularly, coming back to your question, provision reversal. I mean, we have a reverse – I mean, normal reverse of provisions, but net-net, I mean, we have created more provisions in the Budimex business. Thank you. Begoña Morenés: Thank you, Iñaki. The next set of questions come from Marcin Wojtal from Bank of America. First question, do you anticipate Heathrow to require a capital increase in 2021 based on its revised traffic forecasts and would Ferrovial participate in such a case? Ignacio Gastón: Thank you, Begoña. Hello Martin, this is Ignacio Gaston from Ferrovial Airports. I think from our perspective, as Ferrovial, we see that there is no need for an equity injection in the short term, given the strong liquidity position at Heathrow. Having said that, no scenario can be disregarded, given the strange circumstances and the uncertainty resulting from the pandemic and its financial consequences. If such potential scenario of an equity injection arose in the future, Ferrovial would be seeking for a long-term balance between risk and reward and enforceable and robust regulatory framework. Yes, and just to confirm that according to the forecast that Heathrow shared with the market yesterday, there is no need for such equity injection at all. Thank you. Begoña Morenés: Thank you, Ignacio. Second question, do you believe you could increase toll prices on the U.S. Managed Lanes in 2021? Pedro Agustín Losada Hernández: Thanks, Begoña. This is Pedro speaking from Cintra. Marcin, as you know, we typically don’t give any guidance for toll prices for next year. But in this particular moment, we need to see how things, as I said before, evolves depending on the new traffic patterns, depending on how these new behavioral changes could lead for – end up with different traffic volumes in different times of the day to understand which is going to be the toll price and optimize revenues. But at this point, I cannot share anything else. Thank you. Begoña Morenés: Thank you, Pedro. The last question from Marcin, what is the remaining cash out for ongoing U.S. construction projects that were provisioned in 2019, initially from more than €300 million, we assume this refers to the €345 million provision, which was set in the first quarter of 2019? Ernesto López Mozo: Marcin, I mean, we are going to take this combined between Iñaki and myself, Ernesto. So yes, we are going to give you the number that we have used of the provision. Regarding the remainder of the provision, you also have to take into account that there is some advanced payments that have to be paid back. So bear with us, I mean, we will update on this kind of numbers more at the year-end conference call. But definitely, we have used part of that. Iñaki, if you can take that number, please? Iñaki García Bilbao: Yes. Thank you, Ernesto. Yes, I will focus on the balance sheet and out of the €345 million, I mean, that were provided in 2019, €144 million were released in 2019 and €74 million up-to-date in September 2020. So I mean, pending in terms of balance sheet, I mean, €127 million till the end of this quarter. Thank you. Begoña Morenés: Thank you, Iñaki. The next question comes from Eric Luo from JPMorgan. Can you provide an update on the negotiations for 407’s Schedule 22? Do you have a sense for what threshold or level of congestion is needed to be reached to avoid a penalty next year and are there similar Schedule 22 type clause for the U.S. managed lanes? Pedro Agustín Losada Hernández: Thanks, Begoña. This is Pedro again. Eric, the first part of your question, it’s true that we keep on negotiating with the technicians of the administration to understand the impact under the basis that we are in the petition based on the concession contract. As we have mentioned several times, is that pandemia is force majeure with the contract. So that should avoid any application of this congestion payment on the Schedule 22 from the contract. We think that we are working quite well with the administration and trying to find the solutions for this year 2020. With respect to the next year, again, it’s complicated, not only – see, which is going to be the – potentially, the outcome could be similar to the extent that it’s very difficult to understand and to define when the pandemia is over. And again, since we believe we are covered by the concession contract, that allow us to say that it’s quite difficult to predict what is going to happen in 2021. But as of today, we feel comfortable. And with respect to the last part of your question, if there’s similar clause for fiscal ‘22 in the Managed Lanes. The answer is no. We have no such a type of clause in the Managed Lanes. Thank you. Begoña Morenés: Thank you, Pedro. The next question comes from Rushil Paiva from MainFirst. Have you seen a slowdown in order intake in the third quarter of 2020 or weakness beginnings to show in any of the group’s key markets? Iñaki García Bilbao: Thank you, Begoña and Rushil. Iñaki García from Construction. Well, yes, I mean, you see less works in the Q3 2020. It’s true that we see some delays in the bidding processes, probably this is – well, a consequence of the pandemic and how it’s impacted in the different administrations. In the U.S., when you are expecting, I mean, to win contracts of big size, in this year, we haven’t had 1 of these, and this is due to the delays. But also, we see that in some markets, like Poland, probably the market is getting a bit tougher. And we are more interested in having, as mentioned before, profitable backlog and not be so worried about creating, I mean, well, getting – I mean, increasing the backlog, I mean, with contracts that we don’t see the profitability because of this tougher markets due to the variations of prices. Thank you. Begoña Morenés: Thank you, Iñaki. The next question comes from Nandeep Bhambra from West Capital. On Slide 20 of the presentation, you mentioned Ferrovial has a strong liquidity for investment opportunities with the economy reopening. With Ferrovial now trading at around €20, how should we think about the accretion related to a larger and more meaningful share buyback relative to new investment opportunities? Ernesto López Mozo: Thanks, Nandeep. This is Ernesto. Well, two things to mention regarding your question more than accretion regarding the typical earnings per share assessment, we should look at that in terms of value and valuation given business plans, right? And we are not publishing our business plans now. I mean there is a lot of things moving around. But of course, we have the different sensitivities. Two things I am going to mention to answer your question. Well, the first one is that you see that we keep on doing the buyback program. And rest assured that new investment opportunities will be benchmarked against the share price, okay? So there’s going to be good opportunities probably going forward. Yes. And it could very well be also shared at some point in time. But we are looking as a preference for industrial investment with a benchmark of our own share, okay? So that should give you comfort, I guess. Begoña Morenés: Thank you, Ernesto. There are no further questions. Ernesto López Mozo: Well, thank you all. Thanks for attending. A lot of information, just hope you stay healthy. Thanks.